The Economic Irrationality Of Securities Class Actions

Law360, New York (March 24, 2014, 12:20 PM EDT) -- The U.S. Supreme Court took a close look at securities class actions recently, hearing oral argument in Halliburton v. Erica P. John Fund, on the continued viability of the “fraud-on-the-market” doctrine, which relieves plaintiffs of the obligation to prove actual reliance in these cases.

More recent learning has undermined the assumptions underlying fraud-on-the-market, and the briefs filed in the Supreme Court reflect this evolution in economic thinking.

But the defenders of fraud-on-the-market also argue strenuously that the “ends justify the means.” Plaintiff class action attorneys, and...
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